Colombia Land Grab by Billionaires Risks Pledge

Javier Diaz, with his children at his stepfather’s house near Sincelejo, says he will file a claim to win back the land he sold after receiving death threats. Photographer: Andre Vieira/ Bloomberg Markets via Bloomberg.

Aug. 29 (Bloomberg) -- The last time Javier Diaz saw his
father was when he was 14 and Colombian paramilitaries accused
the elder Diaz of supporting guerrillas. That was equal to a
death threat at the height of Colombia’s now five-decades-long
internal war.

Armed men took his father away in a truck in 1994 and then
set ablaze his uncle’s farm and home in a mountainous area of
northern Colombia, Bloomberg Markets magazine reports in its
October issue.

Death squads, which emerged to protect landowners from
guerrilla extortions and kidnappings, suspected that Diaz’s
father was paying Latin America’s oldest and largest guerrilla
group -- the Revolutionary Armed Forces of Colombia, or FARC --
a tax on his 20 head of cattle, Diaz says. That was proof enough
that he was an enemy supporter.

Diaz still doesn’t know what became of his dad. More than a
decade later, the threats started again. This time, land
speculators told Diaz and his family they would face the wrath
of the paramilitaries if they didn’t sell his father’s property.
The Diazes promptly turned over the 34 hectares (84 acres) for
about $2,000.

“The paramilitaries had accused my entire family of being
guerrilla supporters,” Diaz, a farmer and rancher, says at his
stepfather’s house, where he now lives. Accordion-infused
vallenato music blasts on the radio, and a clucking chicken
scurries across the dirt floor.

Displaced Victims

Diaz is one of 4 million displaced victims caught in the
crossfire of a conflict that has involved guerrilla groups,
paramilitaries, drug cartels and official government troops.
Now, Diaz says he will set out to get his land back.

That’s because President Juan Manuel Santos says he will
return property or pay restitution for land that was stolen,
abandoned or purchased by intimidation -- as Diaz says happened
to his family. Colombia has the world’s second-biggest
internally displaced population, after Sudan, according to the
United Nations.

Santos’s law, which the Colombian Congress passed in May
2011, took effect in January. The legislation is the cornerstone
of Santos’s efforts to finally bring peace to Colombia.

It comes just as foreign and local billionaires such as
Brazil’s Eike Batista and Colombia’s Luis Carlos Sarmiento are
stepping up investments in remote parts of the nation. They’re
encouraged by improved security and a pronounced decline in the
cocaine trade.

Investigate Fraud

The government has set a goal of returning to peasants
about 20,000 square kilometers (7,722 square miles) of land they
once owned. To make the plan work, Santos is directing the land
registry to investigate fraud and verify existing property
claims.

The law creates a temporary justice system to rule on land
disputes dating back to 1991 and puts the burden of proof on
current landowners rather than displaced victims. People or
companies that knowingly bought stolen land will be required to
return it to victims. Those who bought in good faith will
negotiate payment of rental fees or other compensation to
original landowners.

“A country injured like ours, for so many decades, by
absurd violence, by blows between brothers, decidedly needs to
walk the road of reconciliation and recognize victims and give
them reparations, so that we can move forward,” Santos said on
television on Aug. 19.

‘I Doubt It’

Diaz says he likes that promise -- and doesn’t trust it.
“Will the government really help people like me?” he asks. “I
doubt it. They’re more interested in serving big businesses.”

At stake is a country’s attempt to jump-start dramatic
change. The president, who took office in August 2010 for a
four-year term, plans to distribute land to war victims even
before the conflict is fully resolved. At the same time, Santos
wants to attract investors in regions once crippled by violence.

With the help of U.S.-financed military aid, as well as tax
increases on the wealthy in the past decade, Colombia has
reduced cocaine production by about a third and halved the
number of FARC insurgents to about 8,000.

Santos said on Aug. 27 his government has held what he
calls exploratory talks with FARC rebel envoys that could lead
to fresh peace negotiations.

The value of Colombia’s peso has gained 6.5 percent this
year and Colombia bonds rose to a record low yield of
6.58 percent as of Aug. 17, the lowest since the securities were
issued in 2009. Those factors have spurred foreign investment
that drove the country’s growth last year to the fastest in four
years.

‘Wants Investment’

“Colombia wants investment in a fair social environment in
which land stolen from or sold by terrorized peasants at
trifling prices has been restored,” says Alejandro Reyes,
director of Colombia’s Rural Land Institute and author of a
book, Warriors and Peasants, on how land conflicts have spurred
Colombia’s armed battles.

“Colombia needs to build a culture of legality and get
back large tracts of land that were taken violently,” he says.

Once known as Latin American’s most imperiled country, when
Pablo Escobar ran the Medellin drug cartel in the 1980s,
Colombia is winning over investors. Standard & Poor’s, Moody’s
Investors Service and Fitch Ratings boosted the country’s credit
rating in 2010 to investment grade because the nation had become
safer for businesses.

Murders dropped by 46 percent and kidnappings decreased by
90 percent during the two terms of Santos’s predecessor, Alvaro
Uribe. The former president, who was elected as an independent
candidate, served from 2002 to 2010. Santos was his defense
minister.

Record Investment

Foreign investment in Colombia will hit a record $17
billion this year, the government predicts. Investors have been
wooed by the opportunity to legally buy land at rock-bottom
prices and to hire workers hungering for jobs, even at low
wages.

CCX Carvao da Colombia, Batista’s coal unit, said it plans
to invest $5.5 billion to develop a mine, a railway and a port
project in Colombia and is waiting for regulatory approvals. Sam
Zell’s Chicago-based Equity International is betting on real
estate with a $75 million investment in Bogota-based Terranum, a
commercial builder.

Carlos Slim

Grupo Carso SAB, the Mexico City-based global conglomerate
controlled by billionaire Carlos Slim, bought a 70 percent stake
in February 2011 in a company with a contract to explore and
produce oil in Colombia’s eastern plains. That’s a region near
the border with Venezuela where guerrillas still battle with
soldiers.

Sarmiento, Colombia’s richest man, is putting his money on
palm oil and other crops in the eastern plains.

While the wealthy are convinced the state is no longer in
danger of collapse and major cities no longer feel like war
zones, Uribe’s security improvements didn’t take on the causes
of the conflict, says Heather Berkman, a political-risk analyst
at Eurasia Group in New York. Santos’s law attempts to, she
says.

“The overall move from Colombia as a pariah state marked
by acts of terrorism and drug trafficking to one where a
government is making more of an effort to address deep-rooted
problems is a huge step,” she says.

Reyes says the new law reduces the risks that had been
spooking investors. The legislation is intended to prevent
pullouts like that of Body Shop International -- a unit of the
world’s largest cosmetics maker, L’Oreal SA -- which cut off its
palm supplier in Colombia in 2010.

Squatter Invasions

A report commissioned by Body Shop cited the presence of
paramilitaries and squatter invasions. The company didn’t return
calls and e-mails requesting comment.

The so-called anti-restitution army, a newly formed
paramilitary group opposing Santos’s law, sent displaced victim
Freddy Rodriguez an invitation to his own funeral, he says.
Rodriguez is seeking a claim to land in northern Colombia now
owned by Brazil’s German Efromovich, owner of Colombia’s biggest
airline, Avianca Taca Holdings SA. Efromovich has denied
wrongdoing in comments to local press and declined to comment
further.

“I move every 20 days,” Rodriguez says. “Staying in one
place is too dangerous.”

Diaz says that the claim he’s preparing to file will pit
him against Cementos Argos SA, Colombia’s biggest cement maker.
Diaz says the land his family was forced to sell now belongs to
Argos. In deciding whether he should get his home back, Diaz
says he thinks the government will side with Argos, not him.

Reviving Economy

Argos says its spending in Montes de Maria is reviving the
local economy. Argos’s purchases in the region to grow teak
trees, which can be contested under the new law, have been
assailed by opposition lawmaker Ivan Cepeda. He questions how a
company could buy land in good faith in a region with a recent
history of human rights abuses and mass displacement.

“Some of the massacres took place right where Argos is now
developing its reforestation project,” Cepeda says. Argos
denies any wrongdoing and says it bought its land at fair prices
and in good faith after completing title studies.

Death squads in the Montes de Maria region executed more
than 300 people in a series of 50 massacres between 1995 and
2005. About 140,000 people abandoned their homes to flee the
violence.

In one of the bloodiest in 2000, paramilitaries using
helicopters rounded up suspected guerrilla collaborators in the
town plaza of El Salado, where they tortured, chopped up and
raped them in broad daylight, according to a government-commissioned report.

Vultures and Pigs

The killers refused to let victims take away corpses of
family members being feasted upon by vultures and pigs.

“One can make important changes in a place like this,”
says Sergio Osorio, the sprightly head of agroindustrial
operations at Argos. He’s driving along a bumpy dirt road that
cuts through the region’s unforgiving topography.

His work often takes him far from company executives in
air-conditioned headquarters in Medellin to the dusty ranches in
Montes de Maria, where Argos’s teak plantation qualifies for
funding under a UN carbon offset program.

“It would obviously be easier not to be here at all,”
Osorio says. “Despite the difficulties, we see great
opportunity.”

The law also brings new risks. Former President Uribe has
created a group to challenge Santos for re-election. Uribe says
the law could put a damper on investment because it burdens
those who buy land to prove they did it legally.

Business leaders are organizing new paramilitary groups in
northern Colombia, like the one stalking Rodriguez, to oppose
enforcement of the act, says Ariel Avila, a conflict researcher
at Fundacion Arco Iris.

Enormous Potential

Still, Santos’s law has enormous potential, says Jose
Miguel Vivanco, executive director for the Americas at Human
Rights Watch. The real test will be whether those who lost their
land wrongly can get it back, he says.

The Santos government has already received 18,500 claims
for 1.5 million hectares. No property has yet been given back to
previous owners. The government has paid 330 billion pesos in
reparations to 55,000 victims.

“Santos must take urgent measures to protect displaced
communities from the powerful armed groups and local interests
that oppose restitution,” says Vivanco, who’s based in
Washington.

On a muggy December afternoon, Diaz trudges up a dirt road
outside his stepfather’s house, pausing at a hilltop as the
sunset bleeds red across Montes de Maria’s landscape of endless
knolls.

Diaz points toward the horizon of Argos-owned land, where
he can almost make out the site his family once owned. He fears
that Santos’s promise of land restitution won’t be easily
delivered. About half of private land in Colombia is in the
hands of one percent of property owners, according to a U.N.
report.